Homes a Short Walk From Princeton Prove a Tough Sell

A development in Princeton, N.J., was intended to entice wealthy buyers with the promise of luxury living in a vibrant downtown setting.

Yet since 2012, only a handful of units have sold.

By most calculations, the 100-unit complex of rentals, condominiums and townhouses should be a model for new urban development. With units adjacent to Palmer Square, the elegant homes are a short walk from dozens of shops and restaurants and the vaunted gates of Princeton University.

But only seven of the 48 homes have sold, including a 3,200-square-foot townhouse that went for $1.855 million. The rentals leased quickly and several more will be released onto the market this month, including two duplexes listed for $8,600 a month.

The development was intended to tap into a desire among some Americans to trade in the car-dependent suburbs for more accessible urban centers. In a recent study by the National Association of Realtors, more than half of respondents preferred a neighborhood with a mix of stores, other businesses and housing. About three-fourths said a neighborhood was more important than the size of a home. Generally, the lifestyle appeals to two distinct groups: young professionals without children and retiring baby boomers.

“People are buying more than just a house,” said Christopher B. Leinberger, a professor and director of the Center for Real Estate and Urban Analysis at George Washington University. “They’re buying a neighborhood.”

Americans are willing to pay more to live within walking distance from town, according to research by Mr. Leinberger. But while living in downtown Princeton would give a buyer access to an excellent public school system and a pleasant neighborhood with wine and cheese shops, there is no direct train to New York City, a deterrent for commuters. Instead, riders must take a shuttle ride to the nearby Princeton Junction train station.

Homes in the Princeton development, called the Residences at Palmer Square, are priced at a premium, with 4,130-square-foot, three-bedroom condos listed as high as $3.4 million. “It’s priced pretty high for Princeton,” said Harveen Bhatla, co-founder of the Bhatla-Usab Real Estate Group at Keller Williams Princeton Realty. “They were unfortunate in their timing; they were building high-end luxury homes when the market was going down.”

In the last year, the Princeton housing market has begun to recover, with inventory tightening and prices rising. As of November 2013, the average selling price for a single-family home was $1.698 million and the average selling price for a condo was $743,500, according to data provided by Bhatla-Usab. Nearly all of the properties that sold for $1 million or more were large homes with four or more bedrooms.

Part of the residential complex sits atop a parking garage. Internal plazas provide benches, landscaping and walkways open to the public. But rather than face the bustle of downtown, the condos face inward, looking onto a setting that seems more like a serene private community than a new addition to a central square.

“It is very, very dense and I don’t think that it helps the town,” said Allan W. Kehrt, an architect who conducted a feasibility study for the site several years ago. “It is this huge, almost inaccessible community that was plopped down in the middle of Princeton.”

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The Yankee Doodle Tap Room at the Nassau Inn. At the center of Palmer Square, the Nassau Inn recently finished a $20 million renovation.CreditLaura Pedrick for The New York Times

The development has struggled with setbacks for decades. In 1989, a developer built several housing units and parking spaces, but the development stalled and remained a half-built eyesore for years.

After Palmer Square Management acquired the property in 1992, the company spent years negotiating an affordable-housing agreement with the town. The final agreement called for 10 affordable rental units. By the time construction on the new residences finally began in 2009, the housing market was in the grips of the worst downturn of a generation.

“We knew that sales were going to be a little bit lagging as the country recovered from the recession,” said David Newton, vice president of Palmer Square Management, which also operates the retail and office space in Palmer Square.

While the residential component struggles to draw buyers, the retail center is nearly 96 percent occupied with a mix of local shops and national chains including Kate Spade New York, Brooks Brothers and the Bent Spoon, an ice cream shop. At the center of the square sits the Nassau Inn, a landmark Princeton hotel. On a brisk winter morning, Palmer Square was bustling with shoppers and the hotel lobby was full of guests, many seated in red leather lounge chairs near a roaring fire.

Palmer Square has long been a symbol of the potential — and the problems — of urban renewal. The zinc magnate Edgar Palmer began building the square during the Great Depression. Other sections were added over the years. To make way for his idyllic vision of a new downtown, he uprooted an African-American neighborhood. Later, in the 1950s, another African-American community was displaced to create a new street grid on the site that is now the Residences at Palmer Square.

“There is this enormous social justice wound and it’s represented by that site,” said Sheldon Sturges, a founder of Princeton Future, a community planning organization.

Henry Pannell recalls growing up in a close-knit, working-class community on what is now the site of the residential development. When he was a teenager, his family moved from his childhood home when the street was razed and the area reconfigured. “Everything looks out of character to me as far as my childhood and the memories that I have of that street,” said Mr. Pannell, who is now 75 and lives nearby on Clay Street.

The architect Thomas Stapleton designed the original section of Palmer Square in a neocolonial style. The quaint center is a mix of brick, stone and wood shingle buildings with shop names etched in black. The Nassau Inn recently finished a $20 million renovation. Its ballroom, conference rooms, mechanical systems and guest rooms were all renovated. Small, outdated guest rooms were enlarged and updated, reducing the total number of rooms to 188. The ballroom was updated with new finishes.

The new condos and townhouses share the colonial style of Palmer Square, with wrought-iron banisters, 10-foot-high ceilings, crown molding and gas fireplaces. Kitchens have traditional finishes with maple cabinets and granite countertops. The townhouses are equipped with private elevators. Condos start at $1.245 million for a two-bedroom and townhouses range from $1.775 million for a two-bedroom to $2.195 million for a three-bedroom.

Last spring, Palmer Square Management revamped its marketing strategy to lure buyers. The complex is now advertised on Google China and the brochure has been translated into Mandarin in the hopes of luring international buyers.

“We know it’s not for everyone,” said Adrienne Albert, chief executive of the Marketing Directors, the real estate firm that is marketing the development. “It’s a very special lifestyle; it’s a very special product.”

A version of this article appears in print on , on Page B8 of the New York edition with the headline: Homes a Short Walk From Princeton Prove a Tough Sell. Order Reprints | Today’s Paper | Subscribe